ABSTRACT
In this chapter, the author provides answers for the following two separate groups of questions. The first group of questions includes: What determines the general level of expected prices? Will there be a general inflation or deflation of prices? The second group of questions includes: What determines the expected relative prices? Will the prices of instruments of production be high or low? The first group of questions was answered by making an assumption about monetary policy whereby the general level of money demand was so regulated that the money demand price offered for the single product was assumed to be kept stable and thus, through experience, was assumed to be expected to remain stable. The author summarizes the assumptions for the market institutions in multi-product growing economy. He shows the effect which changes in the rate of interest at which money can be lent and borrowed will have upon the selling price of an instrument of production.
